“Jitters remain on sovereign debt. Greece started it, and markets have raced through to Portugal, Spain and indeed the UK,” said Howard Wheeldon, strategist at BGC Partners.

Insurers were in the doldrums, reflecting worries over the sector’s exposure to sovereign debt, with Aviva off 3.2 per cent, while Resolution and Legal & General shed 2.6 and 1.3 per cent.

European Union leaders will hold a special summit on the economy on Thursday.
Traders pointed to Fitch Ratings’ comments that Britain was among the most vulnerable among triple-A sovereigns as causing further market nerves.

Selected defensive stocks were out of favour. Cigarette firms British American Tobacco and Imperial Tobacco dropped 1.2 and 1.1 per cent respectively, while Vodafone was 0.7 per cent weaker.

Energy stocks were in demand as the crude price pushed above $73 a barrel due to a weaker US dollar and robust buying interest as investors returned to the market following last week’s price slide to near two-month lows. BP, Royal Dutch Shell and BG Group climbed 0.1 to 1.6 per cent.

Pointing to a slightly more benign economic outlook for the UK, the Royal Institution of Chartered Surveyors said its monthly house price balance – which represents the net percentage of surveyors who report higher rather than lower house prices – rose to +32 in January from +30 in December.

That was well above the consensus forecast of +28 and not far from November’s three-year high of +35.

Also providing evidence of a stronger property market, British Land rose 1.9 per cent after it posted an 18 per cent rise in third-quarter net asset value. Peer Land Securities was up 2 per cent.

However, Britain’s goods trade deficit widened to its highest in nearly a year in December.